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When Xi meets Duterte: is the China-Philippines honeymoon over?

South China Morning Post logo South China Morning Post 8/13/2019 Raissa Robles
a red and white sign: An activist outside the Department of Foreign Affairs in Manila steps on a paper Chinese flag during a protest against the sinking of a fishing boat. Photo: EPA © EPA An activist outside the Department of Foreign Affairs in Manila steps on a paper Chinese flag during a protest against the sinking of a fishing boat. Photo: EPA

Editor’s note: The opinions in this article are the author’s, as published by our content partner, and do not necessarily represent the views of MSN or Microsoft.

When Philippine President Rodrigo Duterte visits China later this month, he intends to raise with Chinese President Xi Jinping the contentious topic of Beijing’s activities in the South China Sea – and the 2016 UN arbitration ruling negating its territorial claims there.

This has raised speculation that Manila is ready to take a harder line on its relations with Beijing, and on the South China Sea in particular, as since becoming president, Duterte has gone out of his way to embrace Beijing and Xi personally.

The apparent change in stance has some analysts questioning whether the "love” Duterte has previously professed for China is beginning to fade and whether the honeymoon between Manila and Beijing may be ending.

They say the present situation feels markedly different to Duterte’s first trip to China, in 2016, when he practically threw himself at the feet of China’s ruling politburo seeking support.

After announcing "my separation from the United States” to much applause, he pleaded: "I come here and say, I am not asking for free but if I could – [if] China would find in his heart to help us in our needs, then we will remember you for all time.”

China was delighted. President Xi Jinping called Duterte’s visit "a milestone”, the two nations "neighbours” and "its peoples blood brothers”.

The visit neutralised the animosity that had characterised the countries’ relations after Benigno Aquino, Duterte’s predecessor as president, hauled China before the UN Permanent Court of Arbitration to successfully challenge its territorial claims in the South China Sea.

By the time Duterte left Beijing four days later, China had offered a series of financial incentives: US$15 billion worth of foreign direct investments and trade deals; US$9 billion more in low-interest loans; a credit line worth US$3 billion, according to Bloomberg; and 1 million Chinese tourists, according to Zhao Jianhua, the Chinese envoy to Manila.

In return for these promises, worth some US$27 billion, the understanding was that Duterte would set aside the UN ruling against China’s claimed "nine-dash line” – its basis for claiming nearly all the South China Sea, its marine wealth and oil deposits.

By April this year, when Duterte left for the China-sponsored Boao Forum, his admiration for Beijing remained undiminished.

"I just simply love Xi Jinping,” he told reporters. "He understood, he understands my problem and he is willing to help.”

In turn, Zhao was inspired to write a piece for the China Daily newspaper.

"The water is calm and wind fair. To the vast sea let’s set sail,” he wrote, quoting from a Chinese poem, before adding that "riding winds and breaking waves, China together with the Philippines will continue to steer the ship of building the 21st-century maritime Silk Road towards an even brighter future”.

Two months later, though, the wind changed direction. Duterte still insisted "I love China” but after the Philippine military warned Chinese fishing boats were "swarming” around the Philippines-occupied Pag-as an Island– also known as Thitu – he sounded a note of unease.

"[China] has helped us a bit,” he said. "But it behoves upon us to ask, is it right for a country to claim the whole ocean?”

Relations grew even more tense when a Chinese fishing vessel in June rammed a small boat with 21 Philippine fishermen on board. Duterte’s cabinet officials became increasingly critical of China in their statements.

Hermogenes Esperon, Duterte’s national security adviser and a retired general, warned last year’s influx of 1.2 million Chinese tourists and 138,000 Chinese workers should be treated as a potential national security threat.

"We want healthy investment opportunities,” he said. "We want more tourists but there is always another side of the coin … we must not let our guards down.”

In July, the Philippine military announced two Chinese tourists had been caught taking photos of a naval installation on Palawan island in the South China Sea.

Defence Secretary Delfin Lorenzana publicly urged Foreign Secretary Teodoro Locsin Jnr to file a diplomatic protest with China.

He noted with "alarm” a Chinese research vessel violated protocol by repeatedly entering Philippine waters without prior notice, with its automatic identification system turned off, and refused "to acknowledge the challenges from Philippine law enforcement agencies”. Locsin confirmed via Twitter he would file a protest.

Salvador Panelo, the presidential spokesman, last week insisted that because the Philippines and China were "friends, we provide each other with courtesies required of friendship”.

Panelo also said the government could rescind commercial contracts granted to Chinese firms to lease and develop three islands in light of the military’s warning about them being national security risks.

Tensions over security aside, the economic planning secretary Ernesto Pernia has expressed frustration over the slowness of obtaining official development aid (ODA) loans from China, compared to Japan. Of the promised US$9 billion, his agency said only one soft loan of US$62 million for the Chico river pump irrigation project was "active” and "effective”.

According to Jan Carlo Punongbayan, a PhD candidate at the University of the Philippines School of Economics, "as of March 2019, China accounted for 1.8 per cent of all active [signed] ODA loans to the Philippines”.

As for China’s promised US$15 billion in foreign direct investment (FDI) and trade deals, the Philippines Central Bank recorded just US$693 million in FDI from China and Hong Kong in 2017-18.

China became the country’s top trading partner in 2017. However, the increase in trade was weighted heavily in China’s favour. The Department of Trade and Industry recorded exports to China rising from US$6.4 billion in 2016 to US$8.8 billion last year. On the other hand, imports from China to the Philippines rose to US$22 billion last year.

A source familiar with the events shaping bilateral ties between Manila and Beijing described China’s promised loans as "smoke and mirrors”. The source told the South China Morning Post that China’s National Development and Reform Commission remains an obstacle to greater FDI.

"You can’t bring out money unless they approve the project,” the source said. "Not like the Philippines where private corporations can bring out money for investments abroad.”

Meanwhile, in response to the surge of Chinese workers arriving in Manila, the Philippine gambling regulator announced Chinese nationals working in online gaming companies would be confined to "hubs” outside Metro Manila to reduce tension with locals and "protect” the Chinese from criminal elements.

The Department of Finance ordered the Bureau of Internal Revenue to begin collecting income taxes from Chinese workers – with an estimated value of 24 billion pesos (US$461 million) per year for every 100,000 employees.

The Department of Labour promised to tighten its criteria for working visas to Chinese nationals, and the Bureau of Immigration said it may stop issuing visas upon arrival to Chinese "tourists” as many end up working illegally.

Then, on August 6, the issue of the UN arbitration ruling on the South China Sea resurfaced unexpectedly. Panelo said Duterte would "invoke the arbitral ruling” when he meets Xi later this month on his fifth state visit since his 2016 election. The next day, Duterte confirmed this.

These statements were not lost on China. On August 8, the Chinese embassy in Manila issued a statement urging the government to "punish” online gaming companies illegally employing and abusing Chinese workers.

The following day, Chinese envoy Zhao sought to ease tensions, telling reporters: "I don’t recall that [Duterte] said, that he used the term ‘invoke’ [regarding the UN arbitration ruling]. He said, if I remember it correctly, he will mention it in a non-confrontational and friendly manner.”

Zhao said China’s rejection of the ruling remains unchanged but added that "China will continue to be a good friend, a good neighbour and close relative of the Filipino people. The differences over the South China Sea constitute only 1 per cent of our overall relationship.”

Panelo said Duterte would discuss with Xi a proposed joint exploration for oil within the Philippines’ exclusive economic zone in the South China Sea.

"We have to get something out of this friendship,” Panelo said. "I think the joint exploration will be a good one, given the fact that it was the Chinese government that offered the 60-40 deal.”

Neither Panelo nor Duterte has explained whether "60-40” refers to cost-sharing, profit-sharing, or percentage ownership of the corporation that would undertake the service contract. The Philippine Constitution specifies that when it comes to the exploration, development and use of natural resources, the government can only enter into "co-production, joint venture, or production-sharing agreements” with Philippine nationals or corporations that are 60 per cent Philippine-owned.

A source involved in Philippine-Chinese relations who spoke on condition of anonymity said both countries were learning how best to deal with one another.

"The relations with China have not cooled; they have become more mature and a more balanced combination of principle and pragmatism,” the source said. "The Philippines does not seek to be a tributary state nor a province of China; neither does it seek to be a neo-colony of the US or a pawn in its geopolitical scheme. The Philippines seeks to maintain its independence and strategic autonomy.

"[Manila] will continue to file protest notes to China and raise issues in bilateral talks, whenever necessary. But at the same time, it will manage these differences diplomatically and peacefully, and not allow them to become a crisis or to affect the overall relations.

"The Chinese government at times may not understand or may even be confused by some actions or statements by the Philippine side but whatever misunderstanding or confusion may have arisen is usually clarified and resolved through bilateral consultations and diplomatic exchanges.”

At least, there appears to have been a clear signal from the presidential palace: the honeymoon has not yet ended but the Philippines expects China to keep its sweet promises made during the courtship.

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This article originally appeared on the South China Morning Post (SCMP), the leading news media reporting on China and Asia. For more SCMP stories, please download our mobile app, follow us on Twitter, and like us on Facebook.

Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.

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